Investor Presentation - National Bank of Oman March 2019
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor Presentation National Bank of Oman March 2019
Table of Contents
National Bank of Oman Introduction
Operating Environment
National Bank of Oman Overview
Financial Performance
Corporate Governance and Risk Management
Appendix
2National Bank of Oman Introduction
The First Omani Commercial Bank
Overview Ownership (as at 31st Mar 2019)
National Bank of Oman SAOG (“NBO” or the “Bank”) was the first incorporated Bank in the Civil Service
Sultanate of Oman (“Oman”) - established in 1973 as a joint stock company, providing Employees
conventional and Islamic banking services Others < 5 %
holding, Pension Fund, Ministry of
The Bank’s shares are listed on the Muscat Securities Market (“MSM”)
The Bank has 1,549 employees as at 31st March 2019 and is the third largest bank by total assets 23.11% 11.31% Defence
in Oman accounting to US$ 9.2 billion, as at 31st March 2019 Pension Fund,
As at 31st March 2019, NBO serves approximately half a million retail customers and 25,000 7.69%
corporate and SME customers via 66 branches and 196 ATM and CCDM units
In addition, the Bank has two overseas branches in the UAE (Dubai and Abu Dhabi) and one Public
branch in Egypt Authority of
The Bank operates via five main segments, namely, retail banking, corporate banking, investment Social
banking, treasury and international banking, and Islamic banking
Suhail Bahwan Insurance,
As at 31st March 2019, NBO had approximately 11.10% market share in loans and 10.90% market
share in deposits in Oman Group 8.24%
The Bank has won awards for excellence in banking from a number of Government and other (Holdings) LLC,
private sector bodies, recognizing the Bank's contribution to the development of the banking 14.74% The
sector in Oman: Commercial
• Best Retail Bank in Oman for 2017 by The Asian Banker’s Middle East and Africa Regional
Bank of Qatar,
Awards Programme 2017
• Best Islamic Bank in Oman for 2017 by Islamic Finance News Awards 34.90%
Source: Prospectus
Credit Rating Key Financials
US$ in Millions 2015 2016 2017 2018 Mar-19
Total Assets 8,476 9,176 9,014 9,280 9,264
Net Loans 6,582 6,936 6,893 7,298 7,217
Deposits 5,844 6,232 6,393 6,370 6,576
Total Operating Income 353 354 343 335 84
Rating Agency Date Long-term Rating Outlook
Net Profit 156 145 114 131 32
Tier 1 16.27% 15.0% 16.2% 15.2% 15.1%
March 2019 Ba1 Negative
Total CAR 18.15% 16.8% 17.3% 16.3% 16.2%
Loans to Deposit Ratio 112.64% 111.3% 107.8% 114.6% 109.7%
March 2019 BB+ Stable NPL Ratio 1.90% 2.2% 3.5% 4.3% 4.9%
Cost/Income 44.2% 46.0% 48.8% 47.9% 48.4%
3Key Investment Highlights
Strong and Established Franchise Delivering a Superior Customer Experience
Strong and Founded in 1973 and is the oldest bank operating in Oman 196 ATMs and
519k Presence in 3 66 branches 1,549
Growing Long term relationships with prominent companies, Government customers countries across Oman
CCDMs in
employees
Franchise related entities and individuals Oman
Income-to-Asset Ratio(1) Net Interest Margin (Q1 2019)
Strong NBO’s Net Interest Margin (“NIM”) is 3.0% as at March 2019, is among
Profitability the highest margins among its peer group
Profile Among 3.7% 3.7% 3.0% 2.6% 2.9% 2.9% 3.0% 2.0% 2.5%
Peers The Bank has a healthy Income-to-Asset Ratio(1) of 3.7% (Mar 2019)
Mar - 18 Mar - 19 NBO CBD BM Burgan Bank Dhofar CBQ Bank Sohar
Offering Significant investments in technology to offer customers more
First bank in Oman
Superior efficient digital channels Over 60% of customer Customers using digital to implement mobile banking
transactions done using digital channels increased by >90% in
Customer Generate and manage a line of innovative solutions to increase range solutions 2017 services and adopted “Mobile
Experience of products and services First” approach
Total CAR (Q1 2019)
Strong capitalization with total CAR of 16.2% as at Mar 2019 offering
Sound
room for growth
Capitalization
As at March 2019, NBO’s Net Stable Funding Ratio ("NSFR") and 17.4% 18.5% 16.2% 18.7% 17.4% 16.1% 17.0% 15.0%
and Liquidity
Liquidity Coverage Ratio ("LCR") was at 107% and 230% respectively
RAK (BBB+) BM (BBB-) NBO (BB)* Bank Sohar (BB+) Burgan (A+) CBQ (A) Bank Dhofar (BB+) CBD (A-)
41% 42% 53% 51%
38%
Consistent With the consistent growth in Cash dividend year on year with the 400 60%
35%
Dividend
131 114 131
shareholder dividend payout ratio of 40%-50%, NBO is one of the reliable dividend 200 54 59 156 61 145 60 68 10% Net Profit
-15%
value delivery yielding stock in the MSM index - -40%
Payout ratio
2014 2015 2016 2017 2018
UAE – Oman Total Trade Flow(2) (US$bn) Oman Trade Activity Globally and with UAE in 2017(2)
Leveraging the Banking license in the UAE; Oman’s largest trade partner 79% 18% Import
UAE Presence 13.7 13.7
from UAE
as an Emerging Diversification plans to focus UAE operations on trade opportunities 12.5 21%
UAE Export to
Trade Corridor between Oman and UAE
World 82% UAE
2016 2017 YTD 2018
Strong relationship with the Government on the back of the 27.93%
Shareholder ownership (as at 31st March 2019) >27.93% ownership by the Substantial stable and low cost High likelihood of support from
Support Access to stable, significant and low cost deposits from Government Government of Oman deposits the Omani Government
and Government related entities
Note (1): Income-to-Asset Ratio: Interest Income plus Other Operating Income divided by Total Assets
Note (2): Source, Bloomberg as at September 2018
Note (*): NBO was rated BBB- by Fitch by end of 2017. As at March 2019, NBO’s Fitch rating is BB+
4Ratings Profile
Benefiting from a Solid Domestic Franchise and Strong Shareholder Support
“Fitch Ratings has downgraded National Bank of Oman SAOG's (NBO) Long-Term Issuer
Default Rating (IDR) to 'BB' from 'BB+' and removed it from Rating Watch Negative
“Moody's downgraded NBO's long-term local currency deposit rating to Ba1 from Baa3, (RWN). The Outlook is Stable. Fitch has also downgraded NBO's Viability Rating (VR) to
and affirmed its BCA and adjusted BCA at ba2. Moody's downgraded the bank's long- 'bb' from 'bb+' and revised the Support Rating Floor (SRF) to 'BB' from 'BB+‘”
term foreign currency deposit rating to Ba2 from Baa3 due to the new sovereign ceiling.
At the same time, the rating agency has maintained the outlook on the bank's long-term “Fitch placed NBO on Rating watch negative (RWN) on 20 December 2018 following the
deposit ratings at negative” downgrade of the Omani sovereign on 18 December 2018”
“The downgrade of NBO's long-term deposit ratings reflects the Omani government's Fitch (March 2019)
weakened fiscal capacity to support the bank in case of need, as indicated by the
downgrade in the sovereign rating”
“NBO's Viability Rating(VR) is at the same level as the Support Rating Floor (SRF). The
“The affirmation of the BCA at ba2 reflects the resilience of the bank's standalone credit bank's Long-Term IDR is driven by its intrinsic financial strength (as measured by the VR)
profile to a weaker operating environment, which is captured by the lowering of the and underpinned by potential sovereign support.”
Macro Profile to "Weak+" from "Moderate-". The bank's ba2 BCA reflects its sound
capitalization (12.3% tangible common equity/risk-weighted assets at end-2018) and “NBO's VR reflects the tougher Omani operating environment, weak asset quality
healthy profitability. However, Moody's expects the bank's asset quality to continue to compared with peers', high loan book concentration, and only adequate capital ratios.
weaken (4.2% problem loans/gross loans at end-2018), while the bank continues to The VR also reflects NBO's moderate franchise, a competent management team,
maintain modest liquid resources and a concentrated funding base” reduced risk appetite, as well as a strong retail deposit franchise relative to peers”
“The negative outlook on NBO's long-term deposit ratings reflects the potential
reduction in Oman government support capacity (reflected in the negative outlook on Fitch (March 2019)
the sovereign rating) and/or support willingness. In addition, the negative outlook on
NBO's ratings now also reflects potential pressures on its standalone credit strength,
arising from the bank's international operations in the United Arab Emirates” “NBO's SRF reflect Fitch's expectation of a moderate probability of support from the
Omani authorities in case of need. Fitch views NBO as a domestic-systemically important
bank (D-SIB) in Oman despite it not being officially designated as such. Its SRF is
therefore equal to the Omani D-SIB SRF of 'BB'.”
Moody’s (March 2019)
Fitch (March 2019)
5Table of Contents
National Bank of Oman Introduction
Operating Environment
National Bank of Oman Overview
Financial Performance
Corporate Governance and Risk Management
Appendix
6Oman’s Economic Overview
Economic Diversification Strategy Aided by Positive Growth and Government Support
Overview Sultanate of Oman Economic Snapshot
Oman is unlikely to need a bailout similar to the one
The Sultanate of Oman is the second largest country by geographical area that Bahrain got last year as the cash-strapped
among the states of the GCC region, after Saudi Arabia. It is spread over 309,500 Geography 309,500 km2, Oman is the second
sultanate should avoid a financial crisis, according to
km2, and has a 2,092 km coastline. It is strategically placed at the mouth of the largest country in the GCC region
S&P Global Ratings.
Arabian Gulf
Population 4.69 million (Apr 2019) “They don’t need support at all this year and next year,”
Population of Oman is approximately 4.64 million (Dec 2018), with Omani
nationals comprising 2.61 million and expatriates comprising 2.03 million of the a credit analyst at S&P Global Ratings, said in an
overall figure Moody’s: Ba1 (Negative); S&P: BB interview in Dubai. “They’re going ahead with fiscal
Credit Rating
(Negative); and Fitch: BB+(Stable) consolidation, their fiscal position is improving’’
Oman’s nominal economy grew by 15.3 percent during the first 9 months of
2018. Nominal growth is expected to remain favourable next year also rising oil
Nominal GDP US$ 79.19 billion (2018, NCSI , Oman) The market is “possibly overly reflecting concerns with
and gas production boosts exports while the government increases investments
Oman. Oman’s currency peg is set to “remain in place
in the non-oil sector to diversify away from hydrocarbons revenue
US$ 17,066 (2018, derived from for the foreseeable future
Stable political system – Monarchy led by His Majesty Sultan Qaboos who GDP per Capita
Nominal GDP and Population) (February 2019)
commands wide popular support and respect from Omani citizens
Independent, pragmatic foreign policy, aimed at fostering good relations with Current Account Deficit c. 4.5% of GDP (2019, Moody’s
Oman’s neighbours and other countries forecast Baseline Estimate with Oil at $75/bbl)
Oman has acted as a neutral mediator within the region Source: IMF, World Bank, Central Bank of Oman, Moody’s
Stable Macroeconomic Conditions with a well defined Economic Diversification Plan Manageable Debt to GDP Levels as Compared to Peers
Positive GDP Growth .. with Non-hydrocarbon sectors having .. leading to a more diversified economy Gross Government debt to GDP (2019 estimates)
70.7% .. vs. BB rated peers by Fitch
160,000 4.70% 5.00% 6.00% the fastest growth GDP composition 61.3%
57.8%
51.6% 57.4%
Real CAGR of selected sectors, 2011-2016
140,000 4.00%
Utilities 11% 2013 Dec 2018 29.9%
1.20% 1.60% 1.90%
120,000 2.00%
17.6%
Hotels and Restaurants 6.90% 51%
1.10% 1.10% 0.90% 7%
100,000 0.00%
37%
0.08%
-0.90% Health 5.70% 7%
80,000 -2.00%
Oman Coratia (BB+) Namibia South Africa Vietnam Turkey Azerbhaijan
80,971 79,191 (BB+) (BB+) (BB+) (BB) (BB) (BB+)
60,000 -4.00%
Financial Intermediation 5.50% 6% 11%
65,855 96.0%
68,816 7%
40,000 70,690 -6.00% Building and Construction 5.50%
9% .. vs. A rated peers by Fitch 65.4%
27% 38% 61.3% 55.4% 56.3%
20,000 -8.00%
Mining and Quarrying 5.10% 46.9%
- -10.00% 23.7%
Education 4.80%
2014 2015 2016 2017 2018 Total Petroleum Activities Construction
Total non-Petroleum
Nominal GDP (US$ millions) 6.20% Wholesale & Retail Trade Public Administraion & Defence
Activities
Real GDP Growth rate (%) Other Activities Saudi Arabia Oman Slovakia China Malaysia Slovenia Spain
CPI Inflation Rate (%) Total Petroleum Activities 2% (A+) (BB+) (A-) (A+) (A-) (A-) (A-)
Source: Central Bank of Oman, IMF data, NCSI Oman Source: National Center for Statistics & Information Source: National Centre for Statistics and Information Source: IMF World Economic Database, April 2019
7The Oman Banking Sector
Well-capitalized, Liquid and Stable Operating Environment
Overview In 2018, total banking sector assets increased by 8.6% .. and credit continues to rise relative to deposits
US$ billion Credit as a % of total funding
The Omani banking system comprises of 16 commercial banks
(of which 9 are international banks), 2 specialized banks and 2
79.9%
Islamic banks 79.7%
79.5%
Fairly concentrated banking system with the three largest local
banks (NBO included) accounting for approximately two thirds 78.9 79.0%
of total credit in the banking system 73.3 72.6
70.3 78.5%
64.5
Central Bank of Oman (the local regulator) carries out regular 58.1 56.5
78.3%
51.2 53.3
examinations of financial institutions on asset quality, liquidity 47.6
43.9
and capital metrics 39.5
77.4%
Historically, the Omani banking sector has been fairly insulated
from previous financial crisis as a result of:
— Limitation on derivatives products
— Strict monitoring of liquidity metrics
2013 2014 2015 2016 2017 2018
— Tight regulations on overseas lending 2012 2013 2014 2015 2016 2017 2018
Total Assets Total Credits
— Single Obligor Limits and lower debt burden ratios
Banks in Oman are well capitalized .. with adequate liquidity .. and healthy asset quality
Core Capital and reserves as % of total deposits Cash and clearing as % of total deposits Non performing loans as % of total loans
20.9%
25.0% 2.8%
22.3% 22.9%
2.4%
19.3% 18.8% 18.4% 2.1% 2.1% 2.1% 2.2%
10.9% 1.8%
9.8% 9.8%
8.6%
7.2%
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 Q3 2018
Source: Central Bank of Oman & Bloomberg
8The Oman Banking Sector
Peer Benchmarking
Capital Adequacy Ratio ( Q1 2019) Return on Average Equity and Return on Average Assets ( Q1 2019)
Return on Equity Return on Assets
19.9%
18.5% 18.7%
16.7% 17.0% 9.6% 9.8% 9.8% 9.5%
16.2%
8.5%
7.4%
1.4% 1.5% 1.4% 1.3% 1.2% 1.3%
HSBC Oman Bank Muscat NBO Bank Sohar Ahli Bank Oman Bank Dhofar
NBO Bank Muscat HSBC Oman Ahli Bank Oman Bank Dhofar Bank Sohar
Oman
Oman
Income to Average Assets ( Q1 2019) Net Interest Margins ( Q1 2019)
3.9% 3.0% 3.0% 3.0%
3.7% 3.8%
3.4% 2.9%
3.2%
3.0%
2.5% 2.5%
Bank Muscat NBO HSBC Oman Bank Dhofar Bank Sohar Ahli Bank Oman NBO Bank Muscat Bank Dhofar HSBC Oman Ahli Bank Oman Bank Sohar
Oman Oman
Source: Financial Statements and National Bank of Oman; Q1 numbers are annualized by multiplying by 365/90
Income to Average Assets: Interest Income plus Other Operating Income divided by Average Assets
9Table of Contents
National Bank of Oman Introduction
Operating Environment
National Bank of Oman Overview
Financial Performance
Corporate Governance and Risk Management
Appendix
10Business Strategy
Provide a Continuously Superior Customer Experience
Strategic Priorities
NBO’s focus is to expand its retail, corporate and investment banking units where it can have a broader and deeper relationship with its customers in the medium and long-term
Delivering Compelling Solutions Continuously Improve Deepening Relationships with
Leverage Presence in the UAE to
1 & a Superior Customer 2 Operational Efficiency to 3 the Private and Government 4
Capture Trade Flows with Oman
Experience Optimize Cost Structure Sector
The Bank’s long-term strategic goal is to be the bank of choice for both individual and corporate customers
Focus Areas
Continuously generate and manage a production line of innovative solutions to increase range of product and service offering
Deliver
Superior Develop a competitive edge and increase customer retention/loyalty by providing high levels of customer service
Customer Develop the Bank’s brand identity to ensure its relevance and appeal
Service
Provide the best financial services solutions through simple, transparent and easy-to-contract products
.. while Significant investments in technology to increase adoption, by customers, of the more efficient digital channels
Improving
Continue to develop flexible and more cost effective distribution channels
Operational
Efficiency Invest in automation and straight through processing of critical processes to increase revenue, decrease costs and improve the Bank's cost to income ratios
.. and Focusing
on Developing Build a high performance culture within the Bank
a Market- Continue to introduce internal talent management programs
leading Align the Bank’s objectives with employees and assess key performance indicators at the individual level
Workforce
11Key Business Lines
Business Lines Asset Contribution (1)
Asset Contribution Operating Income
Key Highlights (1)
Contribution (1)
Wholesale Banking; 36.0%
Primarily positioned as the Bank of choice for US$ 3.4bn US$ 40m
Omani nationals
– 36.7% of total – 48.2% of
Retail Banking Over half a million retail customers assets operating income
Strong emphasis on technology: innovative and Commerical Banking; 10.7%
advanced digital banking capabilities
Includes large corporate banking, Government
Corporate banking, transaction banking and remedial Funding Centre; 16.6%
Retail banking Group; 36.7%
Banking management division
c. 8,000 corporate customers
Total: US$ 9.3bn
Provides independent financial advice, in
Wholesale Investment addition to transaction execution US$ 3.3bn US$ 37.3 m
Banking Banking Operating Income Contribution (1)
Comprises of asset management, corporate – 36 % of total – 44.4% of
finance & advisory and brokerage assets operating income
Includes Fx and derivatives sales, money
Treasury & markets, interbank and Govt. treasury services Wholesale Banking; 44.4%
International
Banking Established correspondent relationships with
international banks
Formed in January 2015: includes SME, business US$ 1.0bn US$ 10m
and Islamic banking and international business
– 10.7% of total – 12.0% of
Commercial Banking
Presence in UAE (2) and Egypt (1) assets operating income
6 dedicated Islamic banking branches Retail banking Group; 48.2% Commercial Banking; 12.0%
Responsible for managing the Bank's capital, US$ 1.5bn US$ ( - 4) m Funding Centre; -4.7%
funding and currency balances
Funding Centre – 16.6% of total – (-4.7% ) of
Repository of bank’s securities investments, assets operating income
asset/ liability management & cash instruments Total: US$ 84m
(1) As of Mar 31, 2019;
12Retail Banking Group
Overview Principal Products & Services Offered
Primarily positioned as the bank of choice for Omani nationals with the retail customer portfolio
Wide range of deposit products in local and foreign currencies
split as: 57% Omani nationals and 43% expatriates
Current, savings including savings accounts, current accounts, corporate salary
Sturdy retail lending revenues with significant progress in new non-lending products such as and term accounts, call deposits and fixed deposits.
insurance, savings and cards to back up the growth in retail banking revenues deposit As of Mar 31, 2019, total deposits amounted to US$ 6.5bn with 39.1%
accounts as time deposits, 23.1% as savings deposits and 37.8% as current and
Strong focus on developing a compelling wealth management offering for high net worth clients
call accounts
Significant investments in technology and increased the adoption of customers to use more
efficient digital channels Offers two main products: general purpose unsecured loans and
secured housing loans
Over 60% of all its customer service transactions are done using digital banking solutions: number
General purpose unsecured loans are supported by salary transfers
of customers using digital banking services increased by more than 90% in 2017
Lending and regarded as salary related unsecured loans
The Bank is actively reducing its retail customer servicing costs, where possible, by offering As of Mar 31, 2019, total loans to retail customers amounted to US$
alternatives to the traditional branch network including internet banking, ATMs and CCDMs, 3.5bn with 73% as unsecured loans, 27% as secured loans
telephone banking and mobile banking Internal cap on retail mortgages is equal to the statutory limit of 15%
Innovative efforts through developing and testing propositions around block chain technology,
mixed reality and natural language based interfaces. In 2017, it organised a Hackathon, thereby Credit & debit cards: Focused on increasing card usage among retail
engaging the regional fintech and universities to garner new ideas customers, for eg. through introduction of "Nuqati" card reward points
Key selling points are breadth of services and products offered, quality of personnel, innovative Sadara Wealth Management Services: Designed to offer an enhanced
and advanced digital banking capabilities, physical distribution and reach of its branch network Other Products customer service to the Bank's high net worth retail customers
Private Investment Banking: Private banking services including access
As at 31 Mar 2019, the Bank had a network of 66 branches operating in Oman, 196 automatic
to exclusive investment products and international mutual funds to
teller machines ("ATMs") and cash and cheque deposit machines ("CCDMs") and provided
customers with a minimum of US$ 1m in available funds
banking services to c. 517,376 customers
Asset Growth Operating Income (1)
US$ m US$ m
141 146 149
41
35 36 37
3,406 3,399 8
3,263 106 110 112
3,211
33
2016 2017 2018 Q1 2019 2016 2017 2018 Q1 2019
Source: National Bank of Oman and financial statements Net Income Other Operating Income Operating Income
1US$ = OMR 0.3850; (1) Breakdown of segment information is presented in full year financials
13Wholesale Banking Group
Corporate Banking Investment Banking Treasury & International Banking
Corporate Banking Division is a part of the Wholesale Banking Group Provides independent financial advice, in addition to Treasury Division manages the funding and liquidity
Seeks to deliver financial solutions and corporate credit facilities tailored to transaction execution assistance across various requirements of the Bank
meet the needs of every type of business and industry customer investment products and services
Established correspondent relationships with
Very experienced account relationship managers serve the Bank's corporate The principal investment banking services are: international banks and undertakes risk participation,
customers across the branch network both funded and un-funded through primary and
— Asset Management: Manage NBO’s proprietary
secondary market deals
Corporates with turnover over OMR 12.5m as large corporates domestic & international investment portfolios.
Operations are split into the following sub-divisions: Asset Manager of choice for institutional investors The principal treasury services include
seeking external portfolio managers in Oman
— Large corporate banking: focuses on multinational and large corporate — FX and Derivatives Sales Desk: Offers FX,
customers — Corporate Finance and Advisory: Focus on public commodities, interest rates & derivative solutions
offerings, debt security offerings, rights issues and
— Government banking: services the Government, GREs, sovereign — Money Markets Desk: Manages the Bank’s liquidity
equity private placements. Collecting bank for
wealth funds and pension funds within Oman and deposits with the Government
several local IPOs
— Transaction banking: offers customized transaction solutions to — Interbank Desk: Mitigates the Bank’s market risks
corporate customers — Brokerage: One of the longest standing brokers on
arising due to customer transactions
the Muscat Securities Market with a domestic and
— Remedial management division: manages the Bank’s impaired
international clientele — Government Treasury Services: Primary dealer for
financial assets, pursues delinquent corporate accounts and
undertakes account rehabilitation OMR-denominated Government bonds
Key products include working capital finance, term loans, short-term loans,
syndicated loans and trade finance
As at 31 Mar 2019, the Bank provided banking services to c. 8,000
corporate customers
Asset Growth Operating Income (1)
US$ m US$ m
127 135
111
44 48
3,346 3,338 38
2,992 37
2,841 73 83 86
14
23
2016 2017 2018 Q1 2019 2016 2017 2018 Q1 2019
Source: National Bank of Oman and financial statements Net Income Other Operating Income Operating Income
1US$ = OMR 0.3850; (1) Breakdown of segment information is presented in full year financials
14Commercial Banking Group
1 "Tijarati" SME banking 3 Business Banking
Focused on developing products, brands, channels and services for SME customers Caters to mid-sized corporate entities between large corporates and SMEs
In 2013, SME banking division offering products & services was introduced under "Tijarati" brand In 2012, mid-sized corporate offering was re-launched with the implementation of a specific mid-
sized corporate banking sub-division
Existing retail branch network is used to strengthen SME offerings by providing SME customer
service representatives within branches Offers tailor-made services to mid-sector companies whose banking requirements differ from
those of larger corporates
Corporates with turnover < OMR 3m are classified as SMEs
Corporates with turnover between OMR 3m and OMR 12.5m are classified as mid-corporate
As at 31 Mar 2019, provides banking services to 15,415 SME banking customers customers
As at 31 Mar 2019, provides banking services to 854 mid-sized corporate customers
2 Muzn Islamic Banking 4 International Operations
In 2013, "Muzn" Islamic Banking Window was launched to offer Shari'a-compliant products Presence in UAE (2 branches, one in Dubai and one in Abu Dhabi): Bank holds a banking license
(both conventional and Islamic) to operate in UAE
Focused on targeting affluent and HNW clients by offering them privileged banking services
Currently 1 branch is operational in Egypt, the future of the branch is under review
Awarded 'Best Islamic Bank in Oman' for 2017 by Islamic Finance News Awards
Has expanded its operations in the UAE to take advantage of the trade and business flow
All activities conducted are independent from the conventional banking operations between UAE and Oman
Separate Islamic Risk and Asset & Liability Committee to review Bank’s Islamic banking activities Unique proposition centered on creating seamless cross-border experience when serving Omani
As at 31 Mar 2019, the Bank has opened six dedicated Islamic banking branches mid-sized corporates & nationals operating in UAE as well as serve UAE based firms in Oman
As at 31 Mar 2019, international operations accounted for 3.2% of total assets
Total Assets Operating Income (1)
US$ m US$ m
59
50
12 41
10
10
1,450
1,168 1,045 989 47 41 10
32 3
7
2016 2017 2018 Q1 2019 2016 2017 2018 Q1 2019
Source: National Bank of Oman and financial statements Net Income Other Operating Income Operating Income
1US$ = OMR 0.3850; (1) Breakdown of segment information is presented in full year financials
15Table of Contents
National Bank of Oman Introduction
Operating Environment
National Bank of Oman Overview
Financial Performance
Corporate Governance and Risk Management
Appendix
16Operating Performance
Overview Net Interest Margin
Strong financial performance despite challenges faced in the UAE which has been affected by
credit losses and drop in asset volumes
5.29% 5.20% 5.43%
4.93% 5.13%
Focus on maintaining asset quality and highest loan spreads among competitors
Highest Interest Margins and income on assets amongst the banks in Oman: Interest Margins
continue to be stable despite rising cost of funds globally and domestically 3.50% 3.28%
3.16% 2.97% 3.20%
Bank continues to focus on diversifying its non-fund based sources of income which is evident by
increase in other operating income
Significant investments in automation and technology to improve the bank’s cost to income ratio 2.32% 2.15%
1.97% 2.00%
in the long term 1.43%
Healthy Return on Average Assets at 1.7% and Return on Average Equity at 12 % in Q1 2019 (ex
UAE operations constituting 97% of bank’s assets) 2016 2017 2018 Q1 2018 Q1 2019
Cost of Funds Yield Spread
Operating Income Composition Profitability
US$ m US$ m
344.5 336.0 144.9
327.9 47.2% 131.4
114.4
48.8% 47.9% 48.4% 9.6% 9.7%
46.0% 10.7%
254.8 246.1 232.7 8.2% 9.6%
155.3 156.6 148.8
56.9 58.5 48.9 82.0 82.0 3.8% 3.7% 3.7% 3.7% 32.7 3.7%
32.4
36.2 37.7 1.6%
89.7 98.4 89.9 98.1 95.2 99.9 61.8 57.7 1.2% 1.4%
12.8 12.5 1.4% 1.4%
20.2 23.4 24.3 25.2
2016 2017 2018 Q1 2018 Q1 2019 2016 2017 2018 Q1 2018 Q1 2019
Net Interest Income Other Operating Income Other Operating Expenses Net Profit RoA RoE Income to Assets
Staff Costs Cost to Income Ratio
Source: National Bank of Oman and financial statements
1US$ = OMR 0.3850 Note: Income-to-Assets Ratio: Interest Income plus Other Operating Income divided by Total Assets
17Asset Quality
Overview Loan Growth
Decrease in net loans as of Mar 31, 2019 was primarily owing to the decrease in both retail and US$ m
corporate loans partially offset by increase in credit allowances due to IFRS 9 adoption
4.8% 4.9%
Sustainable loan book growth of 3.5% in Oman (US$ 7.22 from US$ 6.97bn) despite UAE loan
book reducing from US$ 327 m to US$ 244m (Mar 2019 vs. Mar 2018 net)
While UAE lending book had elevated provisions for the last 2 years, active measures have been
taken to align the Bank’s credit and operational controls with UAE’s operating environment 2.2% 3.5%
7,637 7,560
Diversified portfolio of loans, advances and financing activities across economic sectors through
7,190 7,196
both conventional and Islamic banking activities eliminating any concentration risk
Continuous build up of general and specific provisions to cover for bad loans: adequate
provisioning with 100.3% coverage of Bank's non-performing loans (Mar 31, 2019)
2016 2017 2018 Q1 2019
Gross Loans NPL Ratio
Gross Loans – Sector Breakup (Mar 31, 2019) Impaired Assets and Provisioning Loss provision held as % of Total Loans
US$ m Conservative ECL
Transport and Import trade Agriculture Government
communication
collective provisioning
2% 0% 0% 139.4%
3% 4.8% 4.8%
Mining and 103.7% 100.0% 100.3%
Others 4.2%
4% quarrying
2% 3.5%
Electricity, gas 3.4%
and water 3.0% 3.1%
Construction
5% 2.9%
6%
366 2.0% 2.2%
Wholesale and Personal
retail trade 48% 293 339 343 367
303
7% 255
192 1.8% 1.7%
1.4% 1.4% 1.3%
Manufacturing Service
7%
2016 2017 2018 Q1 2019 2015 2016 2017 2018 Q1 2019
7%
LLR NPL NPL Coverage
Financial Coll/Stage 1-2 Specific / Stage 3
institutions Source: National Bank of Oman and financial statements
9% 1US$ = OMR 0.3850
18Asset Quality
NPL Ratio contribution by country NPL & collateral coverage
4.8% 4.9% US$
200%m 1,000
172%
180% 161% 900
4.1% 160% 144% 140% 800
140% 700
2.0% 2.0%
3.5% 120% 143% 600
2.7% 1.7% 3.4% 100%
133% 125% 500
2.3% 3.0%
80% 100% 400
2.5% 0.6% 2.7% Oman NPL
0.2% 60% 300
ratio is in
200
line with
40%
291 364
2.8% 2.8 160 192 100
2.2% 2.3% market 20%
2.0% 0% -
2015 2016 2017 2018
2015 2016 2017 2018 Q1 2019 NPL NPL coverage NPL coverage + Coll
NPL-Oman NPL-UAE NPL Market
Corporate asset composition NBO Corporate asset composition MID Peers
NBO 2017 NBO 2018 MID Peers 2017 MID Peers 2018
While other
MID peers are
continue to be
15% 14% exposed to the 14% 12%
54% Exposure to sensitive 50%
sensitive Exposure to
Con sector is low and Con sectors, NBO Con construction and Con
14% reducing 12% has consistently 23% real-estate is high 25%
kept the and increasing
19% concentration 49%
59% 12%
13% low 15%
Con Ser Mfg Oth Con Ser Mfg Oth Con Ser Mfg Oth Con Ser Mfg Oth
Source: National Bank of Oman and financial statements
1US$ = OMR 0.3850
19Capitalization, Funding and Liquidity
Overview Funding Mix
Low cost deposits from Government-related entities (16.28% of total deposits as of Mar 31, US$ m
2019) has contributed to stability of banks’ deposit base and lower cost of funds for the Bank
8,363.0 8,477.0 8,605.0 8,730.0
Decline in equity in Mar 2019 vs. Mar 2018 is primarily due to IFRS 9 adjustments
1,398.0 1,419.0 1,393.0 1,354.0 Current
Decrease in cash balance with Central Bank was primarily due to investments in Govt. 665.0 842.0 800.0 Term
733.0 and Call
development bonds and money market placements (high quality assets with attractive yields) Deposits
Accounts
39.06%
Strong liquidity with liquid asset ratio representing 18.6% of total assets and a high liquidity 37.84%
coverage ratio of 230% (Mar 2019) 6,576.0
6,232.0 6,393.0 6,370.0
Adequate capitalization levels of 16.2% (Mar 2019 excluding interim profits) vs. minimum total Savings
capital adequacy ratio of 13.5% (Central Bank of Oman guidelines) Accounts
23.10%
2016 2017 2018 Q1 2019
Total Deposits Borrowings Equity
Liquid Assets Capitalization
US$ m
17.4% 17.3% 16.3% 16.2%
21.4% 20.3%
18.0% 18.6%
1.4% 1.2%
1.1% 1.1%
333.5 3.7% 3.6%
475.6 3.5% 3.5%
299.6 631.0
600.0
360.2
255.0 258.0 16.0% 16.1% 15.2% 15.1%
12.3% 12.5% 11.7% 11.6%
1,328.8
995.1 818.0 836.0
2016 2017 2018 Q1 2019 2016 2017 2018 Q1 2019
Financial Investments DFB and other money market placements
CET 1 Tier 1 Tier 2
Cash & Cash Equivalent Liquid Asset Ratio
Source: National Bank of Oman and financial statements
1US$ = OMR 0.3850 Note: Qtrly Capital does not include current year profit
20Table of Contents
National Bank of Oman Introduction
Operating Environment
National Bank of Oman Overview
Financial Performance
Corporate Governance and Risk Management
Appendix
21Risk Management Framework
NBO’s risk management framework’s primary objective is to safeguard the Bank from various risks that it is exposed to in a proactive manner and in line with regulatory requirements and best practice.
Overview of Risk Committees
The Board of Directors is responsible for the overall direction, supervision and control of the Bank’s business
The Bank carefully monitors credit, liquidity, market, operational and strategic risk
The Board has established a number of Board committees and management committees to co-ordinate the day-to-day risk management of the Bank
Authorities are delegated by the Board to the Bank’s senior management under the leaderships of the Acting CEO who is required to delegate these authorities to the various Management Committees
responsible for Risk Management
Board Committees
Executive, Nomination and
Board Audit Committee Credit Committee of the Board Board Risk Committee Shariah Supervisory Board
Remuneration Committee
Management Operational Risk Management Business
Management Asset/Liability Investment Islamic Risk Tender
Credit Management Fiduciary Transformation
Risk Committee Committee Committee Committee Committee
Committee Committee Committee Committee
Guiding Principles for Risk Management Activities
Approval All commercial activities which commit the Bank to deliver risk sensitive products require approval by authorised individuals/levels
Independence Clear separation between commercial (the business) and risk management functions
Transparency Risk management structures, policies and procedures are transparent and are based on consistent and comprehensive principles
One Obligor Decision authority is determined by total amount of facilities extended to a coherent group based on shareholdings and/or management control
Committees Decisions regarding policy, product, portfolio, or large (or high risk) exposures are taken by appropriate committees empowered by the Board
Conflicts of Interest Members of committees are required to disclose their business relations to ensure that there is no conflict of interest
Approval Authority The Board delegates risk management authority to the Board Risk Committee (and thereafter to the CEO and various other committees)
Risk Proposals At least two authorised individuals are required to approve risk proposals
Risk and Reward Risk and reward from a transaction are borne by the same business unit
Business Responsibility Business units are responsible for the selection of clients and for managing all of the business activities with such clients within approved limits
Source of Internal Policies These guiding principles are dictated by the policies and guidelines from the Central Bank and Capital Markets Authority
22Key Investment Highlights
Strong and Established Franchise Delivering a Superior Customer Experience
Strong relationship with the Government on the back Founded in 1973 and is the oldest bank operating in
of the 27.93% ownership (as at 31 March 2019) Oman
Access to stable, significant and low cost deposits Long term relationships with prominent companies,
from Government and Government related entities Government related entities and individuals
Shareholder
Support Strong and Growing
Franchise
Only Omani bank with a banking license in NBO’s Net Interest Margin (“NIM”) is 3.0% as at
the UAE; Oman’s largest trade partner Mar 2019 (3.3% as at 31 March 2018) is among
Leveraging the the highest margins in its peer group
Diversification plans to focus UAE Strong
operations on trade opportunities
UAE Presence The Bank has a healthy Income-to-Asset Ratio1)
Profitability
between Oman and UAE as an Emerging of 3.7% (Mar 2019)
Profile Among
Trade Corridor
Peers
Experienced
Management Offering Superior
and Board Customer
Experience Significant investments in technology to offer
customers more efficient digital channels
Sound Generate and manage a line of innovative solutions to
Capitalization increase range of products and services
Seasoned management with significant and Liquidity
banking experience and a strong and
influential board Strong capitalization with total CAR of 16.2% as at
March 2019 (15.9% as at 31 March 2018) offering
room for growth
As at March 2019, NBO’s NSFR and LCR was at 107%
and 230% respectively
Note (1): Income-to-Asset Ratio: Interest Income plus Other Operating Income divided by Total Assets
23Table of Contents
National Bank of Oman Introduction
Operating Environment
National Bank of Oman Overview
Financial Performance
Corporate Governance and Risk Management
Appendix
24Balance Sheet
Amounts in USD ‘000 As at 31 March 2019 As at 31 December 2018 As at 31 December 2017
Assets
Cash and balances with Central Banks 835,932 818,325 995,094
Due from banks and other money market placements (net) 257,571 254,712 360,182
Loans, advances and financing activities for customers (net) 7,217,138 7,297,940 6,893,171
Financial investments 630,556 600,387 475,636
Premises and equipment 166,008 167,169 170,896
Other assets 157,278 141,783 118,922
Total assets 9,264,483 9,280,316 9,013,901
Liabilities
Due to banks and other money market deposits 277,774 405,062 326,642
Customers' deposits and unrestricted investment accounts 6,576,431 6,369,823 6,392,901
Euro medium term notes 799,792 797,787 599,756
Other liabilities 229,717 242,945 190,512
Taxation 26,785 27,062 20,301
Subordinated debt - 44,156 64,935
Total liabilities 7,910,499 7,886,835 7,595,047
Equity
Share capital 422,325 422,325 402,213
Share premium 89,519 89,519 89,519
Legal reserve 140,774 140,774 134,070
Other non-distributable reserves (5,473) 42,964 61,010
Proposed cash dividend - 67,571 60,332
Proposed stock dividend - - 20,112
Retained earnings 406,839 330,328 351,598
Total shareholders' equity attributable to the equity holders of the bank 1,053,984 1,093,481 1,118,854
Tier 1 perpetual bond 300,000 300,000 300,000
Total equity 1,353,984 1,393,481 1,418,854
Total liabilities, subordinated debt and equity 9,264,483 9,280,316 9,013,901
25Income Statement
For three months period For three months period For the year ended For the year ended
ended 31 March 2019 ended 31 March 2018 31 December 2018 31 December 2017
Amounts in USD ‘000
Interest income 104,384 97,132 396,506 389,288
Interest expense (46,730) (35,291) (163,810) (143,145)
Net interest income 57,654 61,841 232,696 246,143
Other operating income 24,301 20,187 95,158 89,862
Income from Islamic finance and investment activities 4,392 3,621 16,296 15,138
Unrestricted investment account holders share of profit (2,356) (2,216) (9,047) (7,951)
Net income from Islamic financing and Investment activities 2,036 1,405 7,249 7,187
OPERATING INCOME 83,991 83,433 335,103 343,193
Staff costs (25,213) (23,434) (99,886) (98,125)
Other operating expenses (12,517) (12,795) (48,906) (58,514)
Depreciation (2,883) (3,138) (11,577) (10,940)
Total operating expenses (40,613) (39,367) (160,369) (167,579)
PROFIT FROM OPERATIONS BEFORE IMPAIRMENT LOSSES AND TAX 43,378 44,066 174,734 175,614
TOTAL IMPAIRMENT LOSSES (NET) (5,188) (5,652) (19,213) (42,469)
PROFIT BEFORE TAX 38,190 38,414 155,521 133,145
Taxation (5,834) (5,701) (24,073) (18,792)
PROFIT FOR THE YEAR 32,356 32,713 131,448 114,353
OTHER COMPREHENSIVE INCOME
Net movement on FVOCI investments - (2,808) (5,673) (11,473)
Impairment losses on available-for-sale investments already recognized in
(4,444) - - 1,787
comprehensive income
Debt instruments at fair value through other comprehensive income 164 - - -
Tax effect of net results on FVOCI financial investments - (168) (244) 317
OTHER COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR (4,280) (2,976) (5,917) (9,369)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR. 28,076 29,737 125,531 104,984
26Thank You
Investor Presentation
National Bank of Oman
March 2019
27You can also read
